RBA Tightening Risk Escalates as Price Pressures Spike, Warns TD Securities

TD Securities warns that a spike in Australia’s underlying price pressures raises the risk of further RBA tightening, challenging market expectations of imminent rate cuts. With trimmed-mean CPI around 3.6%, low unemployment and sticky services, TD argues the RBA may keep rates higher for longer or even consider another hike. Markets should expect upward pressure on Australian government bond yields and a stronger Australian dollar (AUD/USD) if rate-hike risk rises, while equities could face headwinds. Key near-term catalysts include monthly and quarterly CPI releases, the Wage Price Index and the RBA meeting in May. Investors should reprice the timing of cuts currently priced for late 2025 and monitor data that could sustain a hawkish RBA stance.